You have stacks of quarters, dimes, nickels and pennies (these represent $0.25, $0.10, $0.05 and $0.01, respectively, in the US…More
What is the angle formed by the hands of the clock when it is 1:45?
142.5 degrees. If we just think of the clock hour hand at 1 and the minute hand at the 45…More
Most of the time, increased leverage means an increased IRR. Explain how increasing the leverage could reduce the IRR.
This scenario is admittedly rare, but it could happen if the increase leverage increases interest payments or debt repayments to…More
In an LBO model, is it possible for debt investors to get a higher return than the PE firm? What does it tell us about the company we’re modeling?
Yes, and it happens more commonly than you’d think. Remember, high-More
How would you adjust the Income Statement in an LBO model?
The most common adjustments: • Cost Savings – Often you assume the PE firm cuts costs by laying off employees,…More
Explain how a Revolver is used in an LBO model.
You use a Revolver when the cash required for your Mandatory Debt Repayments exceeds the cash flow you have available…More